Introduction
Innovation is an important part of continuous improvement. The current case outlines the effect of innovation in the healthcare system in India. More precisely, it highlights the application of the low cost high volume at the Aravind hospital to increase access to care for the millions of people who cannot afford ophthalmic care. Some of the concepts discussed in the case include the focus on the rural communities and the effect on performance, the business model adopted by Aravind, whether it is optimal for acquiring capital investments, and whether it maximizes social impact. The case also discusses the social innovations adopted at Aravind, gives an opinion on whether they are disruptive, their significance, and the conditions necessary for the replication of the innovations elsewhere. The case discusses Aravind as a social enterprise, the lessons that can be derived from the case and the application of the model in the healthcare system in the United States.
The Focus on Rural Communities
The focus on the rural communities is justified because the population in these areas do not have access to the health care facilities because of geographical and economic barriers. It is also from this population that the founder could finding the economies of scale on which the business model is dependent. This motivation has helped enhance the growth, performance, and the impact that the hospital has had. Firstly, the focus on the rural areas has helped give eye care to the millions of deserving populations. The reduction in the costs of care facilitated to the impact by enhancing access to care. The focus on the rural areas also helped grow the enterprise through the profits that are reinvested in the hospital as well as the medical research foundation.
Low-Cost High Volume Business Model
The business model used by Aravind is as unique as it is successful. The low-cost high-volume business model entails charging low prices for the services delivered and delivering a high volume of services and products. As highlighted in the case, the proportion of eye surgeries that are offered at a low cost or for free at Aravind amounts to 70% while the remaining 30% are charged above the cost. Ideally, Aravind relies on economies of scale to make its profits (Kaul 249). Additionally, the profits derived from the core business activities are used subsidizing the cost of offering free surgeries. The remaining portion of the profit is reinvested into the hospital for growth and expansion as well as its medical research foundation.
The business model employed at Aravind is optimal in the event that the company requires capital investment. This is because the operating profits of Aravind exceed those of private hospitals that charge higher prices for their services. Additionally, the cash flow projections of the Aravind Eye Hospitals show that the profitability of the facility can be sustained. For instance, the facility performs over 300,000 surgeries annually. This feat has elevated the eye care system at Aravind to the pinnacle of the eye care programs globally.
The business model also maximizes the social impact. Businesses do not operate in a vacuum. Instead, they operate within a society. Corporate social responsibility principles demand that businesses are conscious of their contribution to the society. Appropriate social missions for business include the development of sustainable goods and services, helping the underprivileged in the society.
The business model employed by Aravind allows the facility to make a profit while engaging in social missions. The low cost of the surgeries and the fact that some of them are offered free of charge allows the underprivileged in the society to get the all-important surgeries. Additionally, Aravind invests its profits back into the hospital for growth and development as well as its non-profit medical research foundation. This aspect ensures sustainability of the eye care system, and important aspect in a country where 25% of the world’s blind people live (Ahmed 353).
Social Innovations at Aravind
Innovation is at the center of the low cost high volume business model that is adapted by Aravind. There are some social and business innovations that have enabled the successful application of the model. One of the business innovations is that the hospital eliminated differential quality standards with all the patients being subjected to a singular standard of quality. Due to the high volume of surgeries performed in one year, the hospital engineered and standardized its processes to increase the throughput.
Consequently, many ophthalmic assistants are trained in the provision of ophthalmic care. The efficiency of the business model is pegged on the recruitment of many ophthalmic assistants to help deal with the high volume of patients, intensive training, and motivation to work. The social innovations in this model include the reduction in the cost of ophthalmic care. The singular standard that is applied for all patients ensures that irrespective of one’s economic status, one can get a standardized and quality ophthalmic care.
The business and social innovations implemented at Aravind are disruptive. The case gives a myriad of evidence that supports the assertion. Firstly, the business and social innovations result in a new market for the providers of ophthalmic care. The innovations provide access to the population that could not access ophthalmic care previously. The innovations also result in new value network that result in the displacement of the previous market leaders (Narayanan & Gina 93).
As indicated in the case, the innovations have led to Aravind Eye Care System to be the largest of its kind globally. The upset to the existing market trends are also characterized by the largest number of surgeries performed in a year at the facility. As a result, the operating profits posted by Aravind are bigger than the profits posted by private hospitals in the United States.
The disruptive nature of the innovations is important because it introduces a new model in the provision of health care. It is an illustration of a new model. Other providers can learn from the success and failures of disruptive innovations to implement an enhanced product. Kreiner finds that disruptive innovation that is the Aravind Eye Care System has been adopted by over 270 hospitals focus on ophthalmology in India and other parts of the globe (Kreiner).
The business and social innovations adopted at Aravind can be replicated in healthcare systems in other parts of the globe. However, certain conditions are needed. Firstly, the population that requires the health care services needs to be large because the business model in which the innovations are encapsulated relies on economies of scale for financial viability. The cooperation between various providers is required to push the costs of care down to an affordable level. For instance, Aravind has an on-site subsidiary called Aurolab that manufactures the Intra-Ocular Lens that are sold for four dollars. This reduces the costs significantly from the 300 dollars that Aravind paid to import the lens from the United States (Kreiner). The resultant reduction in fixed and variable costs enables the hospital to offer its services at a subsidized rate.
Aravind as a High Performing Social Enterprise
Social enterprises have certain characteristics that make them set them apart from other enterprises. Firstly, the core business activities of social enterprises are designed to solve the prevailing problems in the society (Social Enterprise UK). Through their core business activities, social enterprises help to improve the community and the quality of life of the people in the community. In addition, social enterprises operate in open markets and then reinvest the revenue they generate either into the immediate communities or the business for sustainability (Social Enterprise UK).
Application of the Social Innovations in the Healthcare System in the United States
Yes, the model, business, and social innovations at Aravind can be applied in the United States to help remedy the challenges in the health care system. However, more innovations would be required to ready the health care system to benefit from the innovations used by Aravind. Under the current dispensation, the model would not be profitable. This is because the reimbursements given by the insurance providers for even the simplest of procedures are too high.
This is caused by the fact that these procedures are performed at the big hospitals which in offering a differentiated standard of quality, levy expensive charges. The success of the model would require these procedures to be performed in lower tier clinics which are less expensive. Additionally, the model would suffer from the resistance from the industry players who benefit from the current models in health care. The disruptive nature of these innovations would threaten their existence in the health care industry.
Conclusion and Recommendations
The social innovations at Aravind show that it is possible to increase access to health care when innovative models are employed. The application of an innovative business model has ensured that ophthalmic care is affordable even for the economically disadvantaged in the society. Further reading has shown that similar models are being replicated elsewhere. However, the success of the innovations is dependent on making the recommended changes some of which include moving simpler procedures to lower tier clinics which are less expensive. This is the recommendation for the health care in the United States.
Attribution page
Ahmed, El Sawaf. Comprehensive Manual of Ophthalmology. New Delhi: Jaypee Brothers, 2011. Print. (page 353)
This source helped provide statistics for the number of blind people in India and how this relates to the global statistics on blindness.
Kaul, Sanjay. Business Models for Sustainable Telecoms Growth in Developing Economies. Chichester, England: Wiley, 2008. Print. (page 249).
The sources helped provide information on the low cost high volume business model used by Aravind hospital.
Kreiner, Thane. Disruptive Innovation and Social Enterprise. Huffington Post. 25 Aug. 2012. Web. 27 Jan. 2017. www.huffingtonpost.com/thane-kreiner/disruptive-innovation- _b_1622145.html
This source provided collaborating information on the social innovations at Aravind, other areas where they are being replicated, and the challenges that impede their replication.
Narayanan, V K, and Gina, O'Connor. Encyclopedia of Technology and Innovation Management. Chichester: Wiley, 2010. Print (page 93)
This source offered information on the characteristics of disruptive innovations.
Social Enterprise UK. What are social enterprises FAQ. Web. 27 Jan. 2017. www.socialenterprise.org.uk/about/about-social-enterprise
The sources provided information on the characteristics of social enterprises. This information was important in determining whether Aravind was a social enterprise.
